As defined by the Council’s Demand Response Advisory Committee, demand response is a non-persistent intentional change in net electricity usage by end-use customers from normal consumptive patterns in response to a request on behalf of, or by, a power and/or distribution/transmission system operator. This change is driven by an agreement, potentially financial, or a tariff between two or more participating parties. Stated simply, demand response is the voluntary and temporary reduction or shift in consumers’ use of electricity in response to specific system conditions or price signals. Demand response products and programs have advanced over the years, and demand response is now recognized to be capable of providing energy, capacity and ancillary services. For example, for the regional system, demand response has the potential to reduce peak load (which defers the build of generating resources) and to provide ancillary services such as operating reserves for integrating renewables.
Demand response is not explicitly referenced or defined in the Northwest Power Act, which is not surprising given that when Congress adopted the Act demand response as we understand it today was not envisioned or anticipated as playing a significant role in resource decisions. At the same time, the functions provided through demand response are recognized throughout the Act, within the concepts, definitions and provisions regarding “electric power” peaking capacity, “resources,” “conservation,” and “reserves.”
The fit with the Act’s definitions is not neat, however. Demand response products function most like (or as a substitute for) a new generating resource that provides additional system capacity as a cost-effective way to meet peak load. The Act’s definition of a “resource” clearly encompasses a generating facility that provides additional capacity. But that definition does not appear to recognize that an established but temporary act of curtailment via a demand response product can provide the same system capacity benefits and so should be considered a “resource.” Some demand response products may fit within the Act’s definition of “conservation,” and thus be considered a “resource” under the Act via that definitional route, but only when the demand response product meets both halves of the statutory definition of conservation – a reduction in electric power consumption as a result of “increases in the efficiency of energy use” and not, for example, just through voluntary curtailment of use. It is not clear whether many demand response products can meet this precise definition, yet they still provide cost-effective capacity and energy benefits like traditional conservation measures that are clearly recognized as a “resource” under the Act.
Demand response products fit within the Act’s definition of “reserves.” The second half of that definition recognizes that planning and operating reserves can be provided not just through generating resources, but also through “rights to interrupt, curtail, or otherwise withdraw, as provided by specific contract provisions, portions of the electric power supplied to customers.” Most demand response products thus constitute “reserves” under the Act. But this second half of the definition of “reserves” distinguishes such rights to interrupt, curtail, etc. from the first half of the definition of “reserves” that are provided “from resources.” At the same time the Act then calls on the Council to include in the power plan “cost effective methods of providing reserves designed to insure adequate electric power at the lowest possible cost.” This indicates the Council can compare the costs of demand response products to the costs of new generating resources and include the least cost in the plan’s resource strategy, even if that least-cost method is a demand response product.
The difficulty fitting demand response products to the definitions in the Act is an artifact of the time of the Act’s drafting and approval. For the most part, however, this difficulty is irrelevant to the work of the power plan. This is because the Council will analyze and recommend in the power plan the implementation of demand response products when such products provide the cost-effective means to obtain needed system capacity, energy, ancillary services and reserves, comparing those products and their cost-effectiveness to generating resources and conservation measures providing the same function or benefits. For example, if the implementation of new demand response products will be the cost-effective way to provide needed capacity, we will consider and recommend these products in the plan the same as we would a new generating or conservation “resource” that provides capacity. The functions matter the most for the plan.
The only context in which the definitional issues really matter is when assessing the extent to which actions by Bonneville to acquire “resources” under Section 6 of the Act are consistent with the Council’s power plan. At this point, the Council believes it can continue to work with Bonneville and others to make the correct cost-effective choices for providing system capacity and other benefits without needing to resolve these definitional issues as a legal matter.